Crypto Trading Security and Risk 1 — Questions and Answers
Question 1: What is two-factor authentication (2FA) and why is it important for crypto?
- Having two passwords
- An extra security layer requiring a second verification method beyond your password to access accounts (Correct answer)
- A double encryption method
- Using two different exchanges
Correct answer: An extra security layer requiring a second verification method beyond your password to access accounts
2FA adds a second verification step (usually a code from an app or SMS) making it much harder for hackers to access your account even if they steal your password.
Question 2: What is a private key in cryptocurrency?
- Your exchange login password
- A secret cryptographic key that proves ownership and allows you to send cryptocurrency from your wallet (Correct answer)
- A key to a safety deposit box
- Your account number
Correct answer: A secret cryptographic key that proves ownership and allows you to send cryptocurrency from your wallet
The private key is the cryptographic equivalent of a master password. Anyone with your private key can access and transfer your cryptocurrency.
Question 3: What is a phishing attack in the crypto context?
- Catching fish
- A scam that tricks users into revealing private keys or login credentials through fake websites or communications (Correct answer)
- A type of mining
- A blockchain attack
Correct answer: A scam that tricks users into revealing private keys or login credentials through fake websites or communications
Crypto phishing uses fake emails, websites, and messages that look legitimate to steal credentials, private keys, or seed phrases.
Question 4: What is a seed phrase (recovery phrase)?
- A password hint
- A set of 12-24 words that can recover your entire wallet if lost, representing your private keys (Correct answer)
- A type of password manager
- A blockchain term for a new token
Correct answer: A set of 12-24 words that can recover your entire wallet if lost, representing your private keys
The seed phrase generates all the private keys for your wallet. Anyone with these words can restore your wallet and access all your funds.
Question 5: What is the safest way to store large amounts of cryptocurrency?
- On an exchange
- In a hardware (cold) wallet stored in a secure location with backup seed phrase (Correct answer)
- In a web wallet
- In a phone app
Correct answer: In a hardware (cold) wallet stored in a secure location with backup seed phrase
Hardware wallets keep private keys offline, making them immune to online hacking. Combined with secure seed phrase storage, this is the gold standard for crypto security.
Question 6: What is a 51% attack?
- When 51% of traders sell
- When a single entity gains control of more than 50% of a blockchain's mining/staking power, enabling transaction manipulation (Correct answer)
- A type of scam email
- A software bug
Correct answer: When a single entity gains control of more than 50% of a blockchain's mining/staking power, enabling transaction manipulation
A 51% attack allows the controlling entity to double-spend coins, reverse transactions, or block new transactions, compromising the blockchain's integrity.
Crypto Trading Security and Risk 1
What is two-factor authentication (2FA) and why is it important for crypto?